This and that from Stuart Rojstaczer. Usually, it's about music, higher ed, what I'm up to, or politics of the day. Occasionally, what I write finds its way into newspapers. But then there is this stuff like this: too short or too long or outside the box for an op-ed. I write it down fast, in an hour or less, so there are glitches no doubt. With regard to comments, I ask that any postings use a real name. You know mine. Fair is fair. I post on Monday, Wednesday, and sometimes on Friday.

Monday, October 19, 2009

Bulls, Bears and Pigs

As the saying goes on Wall Street, bulls make money, bears make money, but pigs get slaughtered. That saying came to mind as I was watching the Yankees play the Angels in the Divisional Playoffs. The best seats in the house at Yankee Stadium are occupied by our country's newly created untouchable class. They run the financial companies that Democrats and Republicans alike have decided are too big to fail. Pigs don't get slaughtered anymore. Instead they make money too. The old Wall Street rule of thumb needs a makeover. It should be bulls make money, bears make money, and pigs get trillion dollar backing and multi-billion dollar loans from the government.

When you've decided that a company is too big to fail, you've made our country beholden to a small group of crony capitalists who we are committed to keeping rich no matter what. This is something new under the sun for America. We have decided to create a permanently super-wealthy class. Perhaps worse yet, these a*holes think they are entitled to be treated this way.

Inherent in the American ethos has been the idea that this country is special partly because it holds the possibility for upward mobility for just about anyone. It's not actually true that America allows for more upward mobility than any other country, but it is true that we think it does. What's left unsaid but implied is that downward mobility is possible as well for those that have lost their drive or make stupid decisions. But if gravity doesn't operate anymore for a certain class of individuals, then there's no room for new faces to be seen among the elite.

As you get older, you tend to see patterns repeat themselves. You tend not to panic. You've seen it all before. The world isn't going to end. But this end of downward mobility and retardation of upward mobility is something I haven't seen before. And it implies that a cornerstone of American exceptionalism - that anyone can become wealthy if they work hard enough - is disappearing. You can hear it in the tone of voice when people talk about the wealthy nowadays. Before there was admiration mixed with a hint of "I could get there too eventually" hopefulness. Now there is suspicion and derision mixed with a strong dose of "I'll never get there because the system is rigged" hopelessness.

When I was a kid, the news was full of stories of welfare cheats. Somehow a small number of the poor of this country found ways exploit our social welfare system to buy Cadillacs and filet mignon. These isolated cases fueled resentment of the poor and the partial dismantling of our social safety net.

We now have a new class of welfare cheats. They aren't poor. They already own condos worth tens of millions of dollars in Manhattan, but they want more. They are exploiting our system of corporate welfare and crony capitalism. We print hundreds of billions of dollars and run trillion dollar deficits so these people can create a new financial bubble within a year after the old one collapsed (I note that the Dow crossed the 10,000 threshold despite no real signs of economic recovery). This new generation of welfare cheats is far worse than the ones I grew up hearing about. They cost this country far more.

It's been over a year since Lehman Brothers collapsed and we entered our Great Recession. Our banks still are not loaning out money. Instead they continue down many of the investment paths that got us into our current mess, this time with government guarantees they don't deserve. Two out the three largest banks - Citigroup and Bank of America - are still in zombie mode. We keep pretending that they aren't. They should have been nationalized. I have no doubt that if they had been nationalized this country would be significantly better off today. Money would be available for businesses to borrow. We would have not established an untouchable class of financial titans. Citigroup should be no more. Bank of America should be no more. And all of their top employees should have been kicked to the curb.

I watched the Yankee game the other night and looked at the people in those prize seats going for four to five figures a pop. Many of them are there because we continue to print money to keep them in business. We have a president who is unwilling to make the tough decisions necessary to reign in the corruption on Wall Street. It's even worse. Obama is aiding and abetting their corruption.

Obama has tried to justify the ridiculous salaries these people earn by comparing them to sports figure salaries. What he fails to note is that as a result of those athletes' salaries, the tickets for major sports events are now unaffordable to the middle class. Greed in any sector of the economy has its negative repercussions. In the financial sector, the impact is particularly severe. Well over ten percent of this country is unemployed, defaults on loans continue to rise, and what is being done? Unfortunately, the answer is nothing of substance.

The rationale for creating this untouchable economic class is nonexistent. Congressman Barney Frank tries to make analogies to Baathists in Iraq. We can't just summarily throw these financial titans out, he says. We have to continue to prop up them up because they are the power behind our financial industry. Similarly, Secretary Geithner has tried to claim that these people are too important to the health of Main Street to dismiss them. These rationalizations try to make it seem as if we have no choice but to keep all the players in their seats.

We don't have to shut down all of Wall Street. But we do have to shut down its non-functioning elements. Continuing to prop up entities that are dead weight makes no sense. Over four trillion dollars worth of assets are being held by two banks that are essentially zombies. How can this be good for our country? It's not just bad for our current economy. It bodes poorly for our future. Our current economic path is one that will continue to promote the creation of financial bubbles and entrenches a financial culture that believes in risk without repercussions.

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About Me

About Me. Nosey, huh? OK, here it is. I was born and raised in Milwaukee. Oprah went to my high school. So did Kato Kaeilin. I grew up listening to and singing a lot of Yiddish, Russian and religious music. I've lived in the US, Israel, and Italy. I love partial differential equations and minor seventh chords equally. I am loved and cherish those that love me. In another life, I was a professor at a school well known for its basketball team. Now I'm working on a book, writing songs, and doing some water related science. Email at fortyquestions at gmail dot com.